As hopes for a trade deal fade, similar to May and August, the CNY is devaluating against the USD again. In our work there are a handful of fairly mechanical relationships that should follow if the CNY continues to devalue.

First, in the US, stocks have tended to underperform bonds. In the chart below, I show the SPDR S&P 500 ETF (SPY) relative to the iShares 20+ year US Treasury Bond ETF (TLT). In May and August, when the CNY fell, stocks fell relative to bonds 13.2% and 16.3% respectively. So far, stocks have underperformed bonds by about 3.4%. If history is any guide, this would indicate we are only about a quarter of the way through the relative underperformance US stocks vs. bonds.